Understanding Alberta`s Electricity prices and why now is the time to get off a floating rate

We see an increasing amount of concern for electricity prices in Alberta with business and home owners shocked when their bills shoot up to what can be unmanageable levels.

There is a real feeling of helplessness for consumers with no choice but to pay their local retailer for their consumption and their Wire Service Provider (WSP) for a mix of consumption and demand charges articulated as distribution, transmission, customer service charges and local access fees.

But can we make informed decisions to impact our bottom line or are we completely helpless?

Alberta`s deregulated energy market works like the stock market with supply and demand being the forces of change. A large surge in demand due to a hot or cold day or really anything can push the cost of electricity from 4 cents  to 99.9 cents a kWh  for any given hour of the year. As well on the supply side capacity of thermal or fossil generation source being taken offline for maintenance or renewable energy sources such as wind and solar while fairly predictable still rely on mother nature which can impact the supply side pushing prices up, due to lack of production.

 

 

Types of Electricity pricing plans

While their are a few other things to factor such as which retailer you deal with, and I have my preferences the biggest questions is fixed or floating electricity rates

Fixed plans can be anywhere from 1 to 5 years in length and for that period of time you agree to pay that rate. Which means if the market or pool price rate drops you are not getting as good a deal as you could have. On the other hand if the power pool prices goes up as we have seen recently than you will have saved money.

Floating plans mean that you simply ride the wave going up and down. While not hourly like the power pool, but monthly based off of average price with a small margin of profit to your retailer

A few consideration when making this decision

Floating rates are great for retailers, they have no chance of losing money selling you energy they just put their percentage on every kWh you consume and its as easy as that.

If we look over the past 2 years fixed rates have been significantly better

If you had locked in 2 years ago when prices were significantly lower on a plan for a 3 year term in the range of 5-6 cents per kWh would have been available, where the average shown here for Enmax floating rate s 12.14 cents per kWh over that period of time.

 

Now its extremely fair and correct to say that this is easy to say in hindsight.

But what if we look at January`s rates for fixed pricing

1 year fixed- 6.84/kWh

3 year fixed- 7.99/kWh

5 year fixed- 8.39/kWh

You can quote me

'If you are on a floating plan lock in now in January of 2022 for at the very minimum of 1 year. Where 3 years would be ideal, by the time supply catches up you will have saved substantial money'

 

What has been impacting supply recently

Coal Generation

Alberta in a short period of time has gone from 55% of its electricity generation (2014). To retiring all of the plants progressively finishing at the end of 2021. This was a massive accomplishment in reducing carbon emissions for the province that was achieved by private investment. The companies that owned these facilities has strong incentives to avoid carbon taxes.

But the plan was to more than replace this coal capacity with natural gas has seen some challenges.

TransAlta took these coal assets offline permanently in 2018

  • Sundance 1 (280 MW)
  • Sundance 2 (280 MW)
  • Sundance 3 (368 MW)
  • Sundance 5 (406 MW) in 2021 (was going to be a natural gas conversion but was cancelled)
  • Converted Sundance 4 partway through going from 406 MW (coal) to 113 MW (nat gas) in 2021

Which means a reduced capacity of  1627 MWs

 

There has been recent additions as well like 

  • Battlecreek 385 MW

 

But until 2023 when projects like these start to come online. Supply will not be what the AESO expected going forward 

  • Cascade 900
  • Empress 45
  • Genesee 1360

If you are looking for a little help to find the best rate plan and retailer, reach out we are glad to help.

Brian Scott
President
Solar Dev
Brian@solardev.ca

 

 

 

 

 

 

 

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